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Stepping into the Start-Up world (for all you independent savvy ones)

06-01-2017

By Natasha Culzac

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Got a cool business idea and want to get it off the ground? We talk business plans and investment for newbies.

If the cringe-worthy performances by Apprentice contestants or the crash-and-burn pitches given by Dragons Den hopefuls haven’t put you off, then maybe it’s time to finally start that business you’ve been dreaming of!

The term ‘start-up’ feels a bit synonymous with everything tech-related but it doesn’t have to be. A start-up can be any young business, from a social enterprise to a food franchise and online clothing label.

But where on earth do I start(-up)?

A good place to start is by crafting a decent business plan together. A good one will be thorough yet simple, highlighting what the market looks like for the product or service, where there is potential for growth in this market, and how your company fits into this. You’ll need an executive summary, detailing your firm’s USP (unique selling point), as well as information on who is heading up the company if not only yourself, and what your funding requirements are.

A business plan should be written in the third person, while any factual statements or research should reference credible sources. You should also make it easy-on-the-eye with coloured graphs and charts where possible, but don’t overdo it! For very specific advice on writing an a-star business plan, check out the guidelines penned by Business Plan Services for Startups.co.uk.

But what if it’s just going to be little old me?

If you’re not planning to take over the world, but you simply want to do something small-time, the best thing to do is to start it on a teeny scale. For example selling jams on your own stall at a weekend food market. Of course with something like this, you’ll still need to register your company for tax purposes and will need to check whether you meet all legal requirements when selling to the public.

For online businesses, the setup can be a lot easier. Sarah Jones is the owner of a part-time sticky label business. She uses an eBay shop to get orders and runs it all from her home. “I wanted to find a flexible way to earn money after my youngest child had started full-time school,” she said. “When I was looking for some sticky labels online, I had an epiphany that I could design, print and sell them myself.”

“I opened a business eBay account and set up the online shop. When you start out you won’t be at the top of the search results, but if you have good customer feedback and quick turnaround times, it priorities you in the search engine results.”

Sarah’s small venture was entirely self-funded and it was very cheap to start. “It was very easy to start selling on eBay,” she added. “It does have a monthly fee for businesses but this is very minimal. The financial outlay was small, though I did have to buy a new laptop and printer.

But what if my business needs a lot of money to get off the ground?

Then you’ll need to think about funding options. Be realistic in when you can expect to start making money and how much it is truly likely to be – with this in mind, can you afford to self-fund the launch of your business? In all likelihood the answer is no.

Peer-to-peer (P2P) lending platforms match up individual investors with new companies seeking capital, therefore bypassing traditional banks and private equity firms altogether. Funding Circle is one of the leading P2P platforms for this purpose. Others include Funding Tree and Rebuildingsociety. If you want to know more about P2P - here’s a handy breakdown.

Crowdfunding

Make the most of people power by putting your pitch on the world’s stage and see how much cash you can gather from the public. Crowdfunding is now a genuine route for many companies wanting to see the light of day. You can offer free gifts or even a slice of your equity in return for people pledging money. Try Kickstarter, Crowdfunder or Gofundme. Also check out Forbes’ seven tips for crowdfunding success.

Private investment

This is where the old way of doing things comes back around. There is a thing called an Angel Investor – this could be a friend or family member, or someone who’s part of an angel group which simply likes to invest in early-stage businesses. Securing capital from the latter of these people can come from networking or from approaching angel syndicates with your idea. The UK Business Angels Association has a list of all the angel groups you can contact.

How they did it

Ed Caldecott is the owner of Spoken Ink Media, a company which provides both the content and the advertising onboard planes, trains and in hospitals.

He started the company firstly with money from his own job, then with a £5,000 investment from his parents. He later secured further financing from proper investors. “You can look for investment right from the beginning and EIS schemes make it very attractive for would-be investors,” he said. “However, be wary of raising £200,000 from private equity. If you haven’t got a profitable business after you’ve spent that £200,000 then you’ll find your own equity gets diluted very quickly. The key question is what do you need the money for? Answer this question as Scrooge McDuck.”

He further advised: “If you want to start at a canter by raising money from private investors then you will need a watertight business model and good personal credentials. At this stage the investors will be investing as much in you as the idea. Ask yourself: do you have the ability to attract proper investment? Can you give a good pitch and are you articulate? If not, then get a partner who is. Make sure your presentation looks great and possibly apply for a kickstarter scheme and don’t be afraid to put a high value on your company. Finally, and most importantly, think about the people who you asking to invest. Your likely investors will be in their sixties and if your punctuation is sloppy and you’re wearing shorts they probably won’t bother with the gem of your idea.

“For investors I would always look for actual people with brains, experience, interest and time over companies. You want to be confident that a) when you’re doing badly they don’t ask for their money back b) they know about aspects of business/law/the product that you don’t.”

Top Takeaway

If you’ve done your homework and have worked out that there is a market for what you want to sell, then it’s time to get some dollar behind you if you need it. Be charming, don’t give away too much equity in the beginning and try not to listen too much to the naysayers who rubbish your idea.

Have you thought about creating a start-up? Share your thoughts!

By Natasha Culzac

Thanks to a journalistic career history and a childhood at Sylvia Young Theatre School, Natasha has her fingers in a few professional pies, doing her best impression of a model and actor as well as personal finance writer. Outside of work she compulsively watches BBC period dramas and constantly lies to herself that this year will be the year she learns French, once and for all.

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